Those who know me have heard my analogy that if you give Congress the problem “2+2=?”, they will, after stern examination of the problem, return – and defend – the answer “Grapefruit”. It’s as if the problem is in Greek and Congress speaks only Latin. Kind of. Congress is a political animal. When moved to act, Congress will redefine the question in terms of winners and losers, and then answer that question in political terms. Political physics doesn’t work like ours. They don’t see the same universe we do.
This is why government programs are laughable on their face, only randomly perform as intended, and always cost orders of magnitude more than they say. They’re designing fixes that work in their cartoon-physics world, but don’t even resemble workable fixes in the real-world.
As an economy progresses through a recession, capacity threatens payroll – too many people are participating in too few sales. Layoffs ensue. This continues until payroll threatens capacity – too few people participating in too many sales. Layoffs slow and productivity soars – fewer workers per unit of GDP. Fewer doing more. Result: businesses can recover up to pre-recession levels with smaller payrolls – some of the jobs lost will never be back. This phenomenon was noted after the electronic trading crash of 1987, and it was seen after the dot-com crash, and it is happening now. A market economy prefers productivity over payroll. Increased productivity (lessening cost) is increased standard of living (lessening price).
This has always been thus, but beginning in the 1950s, and going into warp speed since the 1980s, technology is permitting cheap and rapid advances in productivity, broadbanding the phenomenon. The rapid advance of technology, generally, geometrically increases the number of applications (intended and unforeseen) becoming available to the manager. A simple example would be the “Go To Meeting” type of platforms out there that allow participants to conduct virtual meetings, bypassing the entire travel and hospitality segments of cost. Having an ideal intranet (any node can connect to all nodes) between customers, branches and suppliers was expensive to point of exclusion to the non-government economy just ten years ago, but is available now for a small monthly fee and an application disc per participant.
This phenomenon will only strengthen with time.
How does Congress see the above situation? The mean, evil business victimized the witless, unprotected voter, er, worker. Cartoon-physics fix? Tax the greedy business (further delaying new hiring) and pay the victimized worker (rewarding the lack of work). Real-world problem? It locks us into a systemically worsening problem that will only see – wait for it – systemic unforeseen additional expenses (and will have done nothing to address the productivity effect). Increased productivity is an emergent behavior of having an opposable thumb and the ability to solve abstract problems. It’s human nature, not something to be “fixed”. We need to realize that the pace and scope of improving productivity have reached levels to which we must adapt (or continually lobby for increased unemployment compensation).
The deep answer to systemically ever-increasing unemployment is education, but that requires parental cooperation. So how does government fix this? It … and I know this will come as a shock to some … can’t. This is our problem.
It must become common knowledge that ever-increasing productivity (which we want) means ever-decreasing jobs at any given work-site. This can only mean that each pre-recession full-employment numbers can be reached only in the presence of above average economic performance (which is, by definition, not sustainable) or increased entrepreneurialism (which is). If, for what ever reason, you can’t get rehired after the economy reaches pre-recession levels, you better be smart enough to start a business. That means that you need to pay attention in school. And that means that parents need to implant the life-long importance of education in their young.
 Increasing productivity – increasing efficiency in business – is a societal good. It improves society’s standard of living – the average goods and services available to the average consumer. A vibrant, efficient business community is good for society because there must be a reliable economic base from which to draw the benefits of that society.